Will The TikTok Ban Actually Happen?
On April 24, US President Joe Biden signed a bill to ban TikTok, the short-form video app owned by Chinese company ByteDance. But will it happen? And if so, what impact will it have? Explore these questions with us today. After that, we’ll go over all of the top fundamental events you can trade this week. Let’s go!
Wait a tik, what’s this all about?
The new law states that ByteDance must sell the platform to a US company within a year to avoid such an outright ban. The Chinese company then has nine months from that date to divest itself from the app, with a potential three-month extension if the authorities are feeling nice at the time.
This isn’t a bolt out of the blue. Discussions about banning TikTok have been going on for a few years, with some politicians around the world accusing it of being a tool for Chinese propaganda and a security risk.
Even before the law’s signing a bunch of TikTok bans across the US had barred the app from devices tied to universities and government hardware at the state, local, and federal levels.
We know you didn’t ask, but if you want our opinion, we think the whole thing is pretty silly and probably emphasises that those in power don’t really understand social media, why it’s so popular and what it’s used for. Most experts agree that there’s no evidence the app has done any more damage or risked user privacy beyond what we’ve seen from companies like Facebook or Google.
The bill — entitled The Protecting Americans from Foreign Adversary Controlled Applications Act (H.R. 7521) — passed the House of Representatives by 325–65. Though, we’re happy that Congress finally found something they agree on, it would be nice if it was something more important.
Potential impact on businesses and creators
If the company doesn’t comply with the law and fails to find a US buyer, an outright ban would have a huge short-term impact on many content creators and small businesses who rely on the app.
In case you didn’t know, there are a few different ways that people make money on the platform.
- TikTok pays some content creators based on views, but the payouts tend to be smaller than those offered by YouTube.
- Creators can also receive virtual gifts from viewers, meaning additional payouts.
- Creators make the most money by producing sponsored videos that advertise products.
Many businesses produce their own TikTok content to reach new customers. According to TikTok, around 7 million US businesses rely on the platform and, in 2023, 224,000 jobs were supported by small business activity there.
Last year, TikTok Shop, the platform’s e-commerce platform generated $1.1bn in gross merchandise revenue in the US. This is less than 1 per cent of Amazon’s GMR, but it’s growing fast.
Quarterly revenues, 2017–2023
Source: Business of Apps
Will TikTok be bought?
You might say the clock is tiktok-ing…
Despite the growing popularity of the platform — boasting 150 million users in the US — so far, no one has come forward with a bid for the company. Some experts say that the business is likely valued at over $100 billion, so there aren’t many who can afford it even if they wanted to.
The tech giants — Amazon, Microsoft, Google, or Meta — can all easily cough up this kind of cash, as could Mr. Musk. But most of them could get into some deep antitrust water for buying a direct competitor, which is a big no-no.
Meta has already started working on coaxing tiktokkers over to its rival platform, Instagram, attempting to wipe the business out of the market altogether.
It’s also unclear how much the business is worth the money that would need to be shelled out. TikTok’s number of active users declined in the final three months of last year and its downloads only increased by 4%. By comparison, Instagram saw an increase in active users of 13 million and a 20% increase in downloads.
What will happen remains to be seen, but it’s hard to believe that one of the biggest social platforms in the world will be allowed to simply fizzle out in one of its most important markets.
Popcorn at the ready!
What’s your take?
Do you think TikTok is a legitimate security threat to the US for it to be banned? What’s going to happen over the next 12 months? Share your thoughts with us on X at @_contentworks.
Top fundamental events week commencing 06/05/24
Here’s what’s coming up this week.
Monday
No major events are scheduled.
Tuesday
● AUD — RBA Interest Rate Decision
● EUR — German Balance of Trade
● CAD — Ivey PMI s.a
Wednesday
No major events are scheduled.
Thursday
● CNY — Chinese Balance of Trade
● GBP — Official Bank Rate; MPC Meeting Minutes
Friday
● GBP — Manufacturing Production MoM; Manufacturing Production YoY; GDP Growth Rate YoY Prel; GDP Growth Rate QoQ Prel; GDP MoM;
● CAD — Unemployment Rate
● USD — University of Michigan Consumer Sentiment Index
Here at Contentworks we closely follow market movements and prep content that we think your traders would love to read. Let’s get you started right here.
Speak soon!
The Contentworks team
